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http://hdl.handle.net/2451/26944
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| Title: | Vector Multiplicative Error Models: Representation and Inference |
| Authors: | Cipollini, Fabrizio
Engle, Robert F.
Gallo, Giampiero M. |
| Issue Date: | Oct-2006 |
| Series/Report no.: | SC-CFE-06-01 |
| Abstract: | The Multiplicative Error Model introduced by Engle (2002) for positive
valued processes is specified as the product of a (conditionally
autoregressive) scale factor and an innovation process with positive
support. In this paper we propose a multivariate extension of such a
model, by taking into consideration the possibility that the vector
innovation process be contemporaneously correlated. The estimation
procedure is hindered by the lack of probability density functions for
multivariate positive valued random variables. We suggest the use of
copula functions and of estimating equations to jointly estimate the
parameters of the scale factors and of the correlations of the
innovation processes. Empirical applications on volatility indicators
are used to illustrate the gains over the equation by equation procedure. |
| URI: | http://hdl.handle.net/2451/26944 |
| Appears in Collections: | Financial Econometrics
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